Single digit to scale: Tax relief to speed up EV push

The EV industry saw a strong run in 2015, supported by improved charging infrastructure and introduction of better products. Sales began to trend upward across states. However, the GST rate cut for ICE vehicles from Oct last year impacted EV volumes, as lower ICE prices widened the price gap with electric vehicles. While there is an argument that EV adoption should grow without incentives, there is a case for continuing support for a reasonable period to achieve meaningful penetration. Meanwhile, the Centre has announced withdrawal of subsidies for electric three-wheelers, citing the achievement of target penetration levels, even as several states continue to extend incentives.Against this backdrop, the industry has welcomed Tamil Nadu govt’s decision to extend 100 per cent road tax exemption for battery-powered vehicles by another two years. The move is expected to push EV adoption in the state from about 8 per cent in 2025 into double digits, while reinforcing TN’s ambitions of becoming a major EV manufacturing hub. P R Krithika, programme lead – EVs at the international council on clean transportation, said the extension addresses a key affordability challenge. “EVs, especially passenger cars, still have upfront costs that are 1.3-1.7 times higher than comparable ICE vehicles. Road tax exemptions help bridge this gap and encourage adoption,” she said. While subsidies should eventually be phased out to avoid market distortions, she said that “at this stage, the extension is timely and helps restore consumer confidence after the GST-led price correction in ICE vehicles.”OEMs also see policy continuity as critical. Balaje Rajan, chief strategy officer at Tata Passenger Electric Mobility Ltd, the top e-car brand in TN, said, “Extension of 100 per cent road tax exemption is a progressive move that will enhance affordability. Such continuity is vital for strengthening the electric mobility ecosystem.”

Two-wheeler manufacturers believe the move will aid wider adoption beyond early adopters. Ravneet S Phokela, chief business officer at Ather Energy, the second large E2W player in TN, said the decision would help EVs gain traction in tier-2 and tier-3 cities. “Incentives such as these don’t just reduce prices, they build confidence and create momentum,” he said. He pointed out that TN’s electric two-wheeler penetration stood at about 8.3 per cent in CY2025, well above the national average of 6.3 per cent, adding that “with manufacturing strength, improving charging infrastructure and steady policy support, the state is well positioned to remain a leading EV market.”

From the commercial EV segment, Deependra Sharma, CEO of e-3W Montra Electric at TI Clean Mobility, termed the extension “timely and forward-looking.” He said it “provides stability to both consumers and manufacturers at a time when the industry is transitioning from incentive-led adoption to market-driven growth.”

EV infra ecosystem players echoed the need for outcome-linked incentives. Awadhesh Jha, chairman, Indian charge point operators association, said, “This is a positive step that will keep the momentum of EV growth. Any state intervention should be linked to clear outcomes, and in the case of EVs, incentives should be tied to achieving defined penetration levels, given their role in improving urban air quality.”

The state govt is looking beyond demand-side support. Thiru Srinivasan, senior advisor, EV Sector at FaMe TN – Department of MSME, said greater emphasis is needed on localising supply chains. “We need stronger support for motors, cells, batteries, power electronics and controllers, along with local technology development,” he said.